EUR/USD: forecast for January 25-31

The ECB left monetary policy unchanged in line with expectations. At the same time, Mario Draghi underlined that the ECB is ready to ease policy on the back of weakening inflation and economic growth. Draghi said that such step is possible already at the next meeting in March. Oil prices and the prospects of the emerging economies will play the key role in the regulator’s decision.

It looks like the ECB President has managed to persuade his colleagues from the Governing Council that they may need additional measures because of the changing global economic reality. We got the confirmation that the ECB doesn’t want to let EUR/USD go above 1.10.

The euro was sold on Draghi’s remarks, but there were still buyers at the support levels, so we can’t say that the euro lost all support. The best strategy for a long time from now will be selling the euro on its attempts to recover. At the same time, negative pressure on the euro at the coming week will likely intensify on the potential break in the market’s risk aversion and divergence in monetary policy between the ECB and the Fed. From the technical point of view, the decline of EUR/USD below 1.0780 (bottom of the daily Ichimoku Cloud) will open the way down to 1.0700 and 1.0650. Resistance is at 1.0950 and 1.1000.